Essentials of Business Law 9th Edition Anthony Liuzzo Solutions Manual Download

Ch 09 – Mutual Agreement
Essentials of Business Law 9th Edition

Anthony Liuzzo
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Essentials of Business Law, 9th edition
INSTRUCTOR’S MANUAL
Chapter 9 Mutual Agreement
LESSON OVERVIEW
In Chapter 7 students were introduced to the six elements of an enforceable contract, and
Chapter 8 discussed offer and acceptance—the first of the essential elements for a
contract to be valid. In Chapter 9, students examine the potential problems with achieving
a meeting of the minds, the second of these essential elements. Genuineness, or reality, is
critical to a valid contract, and if there is any misunderstanding, force, or deception the
contract is voidable, and may be disaffirmed at the option of the injured party. A voidable
contract results if agreement of either party is obtained by fraud, misrepresentation,
mistake, undue influence, or duress, or if the contract is one of adhesion, or is
unconscionable. Each of these terms will be explained in this chapter. Students are
encouraged to conduct their own research, and use the end-of-chapter exercises to further
their understanding of these concepts.
9-1
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or
distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
CHAPTER OUTLINE
A. DEFECTIVE AGREEMENTS (p. 140)

B. FRAUD (pp. 140-141)
C. MISREPRESENTATION (pp. 141-142)
D. MISTAKE (p. 142)
E. UNDUE INFLUENCE (pp. 142-143)
F. DURESS (p. 143)
G. CONTRACTS OF ADHESION (pp. 143-144)
H. UNCONSCIONABLE CONTRACTS (p. 144)
I. CHAPTER SUMMARY (p. 1475
J. CHAPTER ASSESSMENT (p. 145)
1. Matching Key Terms (pp. 145-146)
2. True/False Quiz (p. 146)
3. Discussion Questions (p. 147)
4. Thinking Critically About the Law (pp. 147-148)
5. Case Questions (pp. 148-149)
6. Case Analysis (pp. 149-151)
7. Legal Research (p. 151)
KEY TERMS
Key terms are listed at the beginning of the chapter, posted in the student textbook
margins, and placed in bold in the copy. They are listed here for your quick reference.
▪ fraud (p. 140) ▪ undue influence (p. 142)

▪ puffing (p. 141) ▪ duress (p. 143)
▪ misrepresentation (p. 141) ▪ contract of adhesion (p. 143)
▪ mistake (p. 142) ▪ unconscionable contract (p. 144)
9-2
whole or part.
LEARNING OUTCOMES
The chapter Learning Outcomes will help you and the students discover the concepts and
information that should be understood upon completion of the chapter. You may want to
access the PowerPoint (PPT) slides for Chapter 9 when you begin the study of the
chapter and discuss each Learning Outcomes. Each Learning Outcomes will be covered
separately in the Instructor Notes, but they are shown here in total as an overview of the
sections being presented in Chapter 9. The corresponding text page numbers and PPT
slides are listed next to each outcome. These slides should be used to reinforce the main
points of the lecture.
After completing this chapter, the students will be able to:
1. List seven ways in which a lack of a meeting of the minds may cause defective
agreements. (p. 140, PPT slide 2)
2. Identify the elements of fraud. (pp. 140-141, PPT slides 3-4)
3. Explain misrepresentation and how it differs from fraud. (pp. 141-142, PPT slide 5)
4. Explain the concept of mistake in the eyes of the law. (p. 142, PPT slide 6)
9-3
whole or part.
5. Define undue influence and explain its impact upon the validity of a contract. (pp.
142-143, PPT slide 7)
6. Describe duress and the forms that such may take. (p. 143, PPT slides 8-9)
7. Define contracts of adhesion and describe the conditions under which these contracts
are voidable. (pp. 143-144, PPT slides 10-11)
8. Define unconscionable contracts. (p. 144, PPT slide 12)
LECTURE OUTLINE
A. DEFECTIVE AGREEMENTS
Genuineness, or reality, of agreement is said to be present in a contract when there
is a true meeting of the minds of the parties. If there is any misunderstanding or if
any force or deception is used by either party to obtain the necessary agreement of
the other party, the contract is voidable, and may be disaffirmed at the option of
the injured party. A voidable contract results if agreement of either party is
obtained by fraud, misrepresentation, mistake, undue influence, or duress, or if the
contract is one of adhesion, or is unconscionable.
1. Fraud
Fraud is the intentional misstatement or nondisclosure of a material fact
made by one party with the hope of influencing the other party. It does not
matter how the fraud is committed. It may be by spoken or written words
or by acts or conduct. For the injured party to claim fraud, he or she must
prove that the statement or act
i. Was a misstatement or nondisclosure of a material fact
ii. Was made with knowledge of its falsity or with reckless disregard
of its truth
9-4
whole or part.
iii. Was made with the intention of causing the other party to enter
into the agreement
iv. Was relied on by the injured party
v. Resulted in loss to the injured party
It is important to recognize the difference between a fraudulent statement
and a salesperson’s puffing, which is considered a mere expression of
opinion. Intentional concealment or intentional nondisclosure of material
facts (deliberately hiding important information) is just as fraudulent as
making false statements.
2. Misrepresentation
Misrepresentation is the unintentional misstatement or nondisclosure of a
material fact that results in inducing another to enter into an agreement to
his or her loss.
It is important to note the distinction between fraud and misrepresentation
because the remedy is different. An injured party who can successfully
prove fraud may have the contract canceled and bring suit for damages. If
the party can prove only misrepresentation, the contract can be canceled,
but the injured party cannot sue for additional damages.
3. Mistake
In the eyes of the law, a mistake is a belief that is not in accord with the
facts. Mistakes relating to contracts may be concerned with the nature of
the subject matter or the quality of the subject matter. Obviously, not
every erroneous idea or notion is a mistake, and the law makes it clear that
the mistaken belief must concern an existing fact and not a belief about
what might happen in the future. Court decisions involving mistakes are
often complex, and the courts attempt to determine whether the mistake
was “unilateral,” that is, made by only one party, or whether the mistake
was “mutual,” that is, made by both parties. For a contract to be dissolved
because of a mistake, the law usually requires that both parties be a part of
the misunderstanding. That is, the mistake must be mutual.
9-5
whole or part.
4. Undue Influence
Sometimes a person has the power to control the actions of another
because of a special or confidential relationship to that person. Such
relationships are sometimes found between employer and employee,
physician or nurse and patient, teacher and student, attorney and client,
and so on. When someone uses this power improperly to his or her
personal advantage, undue influence is said to exist. A contract resulting
from the use of undue influence is voidable at the option of the party
wrongfully influenced.
5. Duress
Duress is the act of applying unlawful or improper pressure or influence
to a person in order to gain his or her agreement to a contract. Such
pressure can take the form of a threat of bodily harm to an individual or to
his or her family, or the threat of serious loss or damage to his or her
property. When threats are used to force someone to enter into a contract,
the agreement may be dissolved by the injured party.
6. Contracts of Adhesion
A contract that involves parties who have unequal bargaining power is
known as a contract of adhesion. These take-it-or-leave-it contracts are
quite common and are normally enforceable. But when enforcement of an
otherwise legal contract will result in a significant hardship to one of the
parties, courts have considered such agreements to be so unfair as to be
unenforceable.
7. Unconscionable Contracts
A contract that is regarded as shockingly unjust or unfair is said to be an
unconscionable contract. While courts have long been reluctant to
uphold these, more recently, however, the UCC has made such contracts
even less likely to be enforced.
When the UCC was written, it was intended that the unconscionable
clause would apply only to sales of goods. In recent years, however,
9-6
whole or part.
virtually the only successful use of unconscionability under the Code has
been made by consumers in various kinds of contracts involving such acts
as making home improvements, opening a checking account, leasing a
gasoline filling station, and leasing an apartment.
INSTRUCTOR NOTES
A resulting answer or explanation is provided below for each Learning Outcomes in
Chapter 9. Every objective is also mapped to corresponding text page numbers, PPT
slides, and relevant chapter assessment exercises and activities for ease of reference and
use.
LO1. List seven ways in which a lack of a meeting of the minds may cause defective
agreements.
Seven ways in which a lack of a meeting of the minds may interfere with the legal
enforcement of agreements include cases involving (a) fraud, (b)
misrepresentation, (c) mistake, (d) undue influence, (e) duress, (f) contracts of
adhesion, and (g) unconscionable contracts.
Text Pages: 140
PowerPoint: Slide 2
Case Questions: 34
LO2. Identify the elements of fraud.

Fraud is (a) a misstatement or nondisclosure of a material fact; (b) made with
knowledge of its falsity or with reckless disregard of its truth; (c) made with the
intention of causing the other party to enter into the agreement; (d) relied on by
the injured party; and (e) resulting in loss to the injured party.
9-7
whole or part.
Text Pages: 140-141

PowerPoint: Slides 3-4
Discussion Questions: 21, 22, 25
Thinking Critically About the Law: 27, 31
Case Questions: 33
Case Analysis: 38
LO3. Explain misrepresentation and how it differs from fraud.

Misrepresentation is (a) the unintentional misstatement or nondisclosure of a
material fact; (b) resulting in inducing another to enter into an agreement; and (c)
loss to the injured party.
Text Pages: 141-142
PowerPoint: Slide 5
Discussion Questions: 32
Thinking Critically About the Law: 31
Case Questions: 32
Case Analysis: 37
LO4. Explain the concept of mistake in the eyes of the law.

A mistake is a belief that is not in accord with the facts. Mistakes relating to
contracts may be concerned with the nature of the subject matter or the quality of
the subject matter.
Text Pages: 142
PowerPoint: Slide 6
Case Analysis: 35
LO5. Define undue influence and explain its impact upon the validity of a contract.
Undue influence is the improper use of power to control the actions of another
because of a special or confidential relationship to that person. A contract
resulting from the use of undue influence is voidable at the option of the party
wrongfully influenced.
Text Pages: 142-143
PowerPoint: Slide 7
Case Questions: 32
LO6. Describe duress and the forms that such may take.
Duress is the act of applying unlawful or improper pressure or influence to a
person in order to gain his or her agreement to a contract. Such pressure can take
9-8
whole or part.
the form of a threat of bodily harm to an individual or to his or her family, or the
threat of serious loss or damage to his or her property.
Text Pages: 143
LO7. Define contracts of adhesion and describe the conditions under which these
contracts are voidable.
Contracts of adhesion are contracts that involve parties who have unequal
bargaining power. When enforcement of an otherwise legal contract will result in
a significant hardship to one of the parties, courts have considered such
agreements to be so unfair as to be unenforceable.
Text Pages: 143-144
Case Analysis: 36
LO8. Define unconscionable contracts.
Unconscionable contracts are contracts that are regarded as shockingly unjust or
unfair.
Text Pages: 144
PowerPoint: Slide 12
9-9
whole or part.
Chapter 9 Assessment Answers

Matching Key Terms
1. i 4. g 7. j 10. h
2. b 5. c 8. e
3. a 6. d 9. f
True/False Quiz
11. T 14. F 17. T 20. T
12. T 15. T 18. T
13. T 16. F 19. F
Discussion Questions
21. For an injured party to claim fraud, he or she must prove that the statement or act
(1) was a misstatement or nondisclosure of a material fact; (2) was made with
knowledge of its falsity or with reckless disregard of its truth; (3) was made with
the intention of causing the other party to enter into the agreement; (4) was relied
on by the injured party; and (5) resulted in loss to the injured party.
22. Fraud is (a) a misstatement or nondisclosure of a material fact; (b) made with
knowledge of its falsity or with reckless disregard of its truth; (c) made with the
intention of causing the other party to enter into the agreement; (d) relied on by
the injured party; and (e) resulting in loss to the injured party. Misrepresentation
is (a) the unintentional misstatement or nondisclosure of a material fact; (b)
resulting in inducing another to enter into an agreement; and (c) loss to the injured
party.
23. Unconscionable contracts are contracts that are regarded as shockingly unjust or
unfair.
24. Duress can take the form of a threat of bodily harm to an individual or to his or
her family, or the threat of serious loss or damage to his or her property.
25. Students may wish to respond by offering personal experiences. Persuasive
statements based on a salesperson’s opinion are referred to as puffing. They are
usually exaggerations of a product’s features.
26. Examples of the use of undue influence include a doctor recommending certain
medical equipment to his patient, or a financial planner urging a client to make
9-10
whole or part.
certain investments. A contract resulting from the use of undue influence is

voidable at the option of the party wrongfully influenced.
Thinking Critically About the Law

27. A fact is material if it influences a buyer’s decision to purchase the goods or
services.
28. For a contract to be dissolved because of a mistake, the law usually requires that
both parties be a part of the misunderstanding. This serves to protect the party
who was not under the mistaken belief.
29. If pressure takes the form of a threat of bodily harm to an individual or to his or
her family, or the threat of serious loss or damage to his or her property, it
amounts to duress and not merely undue influence.
30. Examples may include contracts involving acts such as making home
improvements, opening a checking account, leasing a gasoline filling station, and
leasing an apartment.
31. Aside from the legal implications, most students would agree that a failure to
disclose material facts or information is unethical. A few might disagree.
Case Questions
32. a. N b. N c. N d. N
33. a. Y b. Y c. Y d. Y
34. a. N b. N c. N d. Y
Case Analysis
35. Principle of law: The courts normally do not attempt to enforce contracts where
there is evidence of mutual mistake.
Decision: There was sufficient evidence in this case to suggest that there was a
mistake by both parties and the mistake would make enforcement of the contract
“materially more onerous” to the buyer than would be the case if the facts had
been as the parties had believed them to be.
36. Principle of law: Courts normally do not enforce contracts of adhesion in cases
in which there is gross disparity in the bargaining power of the parties.
Decision: The court refused to enforce the clause in question.
37. Principle of law: Making a false statement, even when done innocently, is
misrepresentation and is sufficient to invalidate an agreement.
9-11
whole or part.
Decision: Larson is probably not bound to the lease because of Malina’s false
statement about the load-bearing capacity of the floors, which is a material fact.
38. Principle of law: Both fraud and misrepresentation make a contract voidable.
Decision: Harley-Davidson has stated a viable cause of action for contractual
rescission.
Legal Research
39. Results of the team research will vary depending on the dry cleaning
establishments, movie theaters, or parking garages chosen.
40. The Internet should provide numerous cases involving unconscionable contracts
and existing legislation in several jurisdictions that concern such contracts.
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whole or part.
BONUS ACTIVITIES
• Ask each student to bring in an article related to one of the seven reasons for lack
of meeting of the minds that may interfere with the legal enforcement of
agreements. Have each student write a brief analysis on their article, and discuss
their findings in class.
• Ask students to form pairs or small groups, and role play cases of duress in class.
Have them focus primarily on the act of applying unlawful or improper pressure
or influence on a person in order to gain his or her agreement to a contract.
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whole or part.

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Ch 09 – Mutual Agreement

Essentials of Business Law 9th Edition

Test bank: https://testbankpack.com/p/test-bank-for-

Solution manual: https://testbankpack.com/p/test-bank-for-

Chapter 9 Mutual Agreement

A. DEFECTIVE AGREEMENTS (p. 140)

▪ fraud (p. 140) ▪ undue influence (p. 142)

points of the lecture.

After completing this chapter, the students will be able to:

LO2. Identify the elements of fraud.

Text Pages: 140-141

LO3. Explain misrepresentation and how it differs from fraud.

LO4. Explain the concept of mistake in the eyes of the law.

Chapter 9 Assessment Answers

11. T 14. F 17. T 20. T

12. T 15. T 18. T

13. T 16. F 19. F

certain investments. A contract resulting from the use of undue influence is

Thinking Critically About the Law

their findings in class.

or influence on a person in order to gain his or her agreement to a contract.

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